Forward premia crash weakens rupee
"Futures are now quoting at less than the spot price. Backwardation of 2-3 paise has occurred," said Angel Broking associate director Naveen Mathur
By ET Bureau |
The rupee continued to weaken as forward premia crashed under dollar demand from oil companies for repayments. The partially-convertible rupee closed at Rs 45.35 to a dollar on Thursday.
The rupee opened at Rs 45.17 this morning from the previous day's close of 45.25. Intraday trade saw it move in the Rs 45.17-45.45 band as predicted by dealers. "Futures are now quoting at less than the spot price. Backwardation of 2-3 paise has occurred," said Angel Broking associate director Naveen Mathur.
The one-year forward premium dipped 20 paise during the day's trade and closed at 2.49%. It ended at the 113-118 level against Wednesday's closing level of 123 points. Indian oil companies have been on a dollar-buying spree to make import payments to Iran since RBI gave them the go-ahead a few days ago. Banks are buying dollars at the spot rate and selling them in the forwards market, resulting in a weaker rupee.
"The high demand for dollars from oil companies is leading to banks taking buy-sell swaps. The situation is like the one in 2008. Forward premiums are at a discount and the market is likely to remain highly volatile," said Basics Forex executive director KN Dey. The rupee remains under pressure from choppy Indian equities and the $4 billion owed to Iran for the oil.
The rupee opened at Rs 45.17 this morning from the previous day's close of 45.25. Intraday trade saw it move in the Rs 45.17-45.45 band as predicted by dealers. "Futures are now quoting at less than the spot price. Backwardation of 2-3 paise has occurred," said Angel Broking associate director Naveen Mathur.
The one-year forward premium dipped 20 paise during the day's trade and closed at 2.49%. It ended at the 113-118 level against Wednesday's closing level of 123 points. Indian oil companies have been on a dollar-buying spree to make import payments to Iran since RBI gave them the go-ahead a few days ago. Banks are buying dollars at the spot rate and selling them in the forwards market, resulting in a weaker rupee.
"The high demand for dollars from oil companies is leading to banks taking buy-sell swaps. The situation is like the one in 2008. Forward premiums are at a discount and the market is likely to remain highly volatile," said Basics Forex executive director KN Dey. The rupee remains under pressure from choppy Indian equities and the $4 billion owed to Iran for the oil.
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